U.S. corn futures ended sharply lower Tuesday on anxiety about unrest in the Middle East and North Africa, and its potential to reduce commodity demand.

Corn for March delivery closed down 30 cents, the daily exchange-imposed trading limit, at $6.79 3/4 a bushel.

The 4.2% drop was an abrupt retreat from fresh overnight highs that had pushed prices to their highest level since July 7, 2008.

The drop was prompted by worries about the growing unrest in Libya and elsewhere throughout the region. The violence in Libya pushed crude oil futures sharply higher, which in turn fueled worries about the recovering global economy and sent investors fleeing from risk. A slowing economy would hurt commodity demand.

"It's a warning that the world economy is going to have a tough time," said John Kleist, senior analyst for e-BOT Trading.

Corn was "the last domino to fall" after recent corrections in wheat and soybeans, he added. Investment funds have been holding a very large net long position recently, despite signs that demand was starting to erode, he said. The fresh worries about the Middle East and commodity demand prompted widespread profit-taking.

Higher crude oil prices were credited with helping to drive corn prices to record highs in 2008, because of corn's tie to ethanol, and because it increased the cost of production. But analysts said corn would likely react differently to an oil price spike this time.

"In 2008, we weren't coming out of the worst financial crisis since the Great Depression," said Mike Zuzolo, president of Global Commodity Analytics and Consulting.

Don Roose, president of U.S. Commodities in Des Moines, Iowa, added that an increased cost of production won't make a difference this year because farmers are currently enjoying very wide profit margins.

But analysts said that corn still has supportive supply-and-demand fundamentals, and could be underpinned by supply concerns until it becomes clear U.S. farmers will harvest a large crop in 2011.

Ethanol futures tumbled as corn futures dropped their daily, 30-cent limit. Ethanol for May delivery lost 7.2 cents, or 2.9%, to $2.451 per gallon.

Oat futures fell by their daily, 20-cent limit on profit-taking and spillover pressure from limit-down losses in the other grain markets. Oats for May delivery dropped 4.8% to $3.97 1/2 a bushel.